Batticaloa and Trincomalee, Sri Lanka — The chief minister of Sri Lanka's eastern province nodded with concern as a member of the provincial council described a security problem. It was a typical scene of government proceedings – except that the minister is a former Tamil rebel commander and enemy of the four Army generals seated to his left, taking notes.

This unlikely scenario is part of a turnaround the central government has hailed as the "dawn of the east," since its forces reclaimed the longtime Tamil Tiger stronghold last year.

Today, as the Sri Lankan government stands on the verge of overpowering the Tamil Tigers' last remaining territory in the north, observers say development of the east is equally crucial if the country is to break out of its 25-year civil war.

One of two influential rebel leaders who broke away and helped the government win back this province, Sivanesathurai Chandrakanthan, known as Pillayan, was elected chief minister in May. His win underscored the government's pledge to extend greater political powers and economic prospects to the Tamil community in exchange for support.

But challenges persist. Although most of the 200,000 people internally displaced by violence have left makeshift camps, thousands are unable to return to villages and seaside areas now under military control. The resettled often find homes destroyed or looted. Checkpoints and guards are a fixture of daily life. Distrust of the central government persists.

Bombings and gun battles no longer convulse the streets. But military officials maintain that rebel spies prowl the area, making tight security a necessity for now.

Sporadic hit-and-run attacks continue to target government forces in the east. Late last month, a rare Tiger air assault on a Navy base near the eastern port city of Trincomalee wounded four soldiers.

Locals counter that the military's heavy-handed presence has made normal life impossible. Ethnic Tamils, who make up one-third of the province's population, claim they are singled out for harassment and summarily arrested, or worse, on suspicion of having links with the Tigers.

A March report by Human Rights Watch alleged that the government is responsible for hundreds of abductions and "disappearances" in the east. Militia linked to Pillayan's pro-government Tamil party were also implicated in some cases.

"The war is over here, and we don't have the freedoms we need," says K. Nageswaran, an activist who works on behalf of displaced Tamil families. "More psychological damage is done each day."

The military's hard-won victory over the Tigers last year cost hundreds of lives and emptied entire villages. It has since declared some strategic areas of Trincomalee district "high security zones," off limits to former residents.

Despite poor conditions, hundreds of Tamils refuse to leave relief camps until they can return to their homes there. "If we are to die, we want to die on our land, where our ancestors died," says Ganamunthi Jayanthi, at her tin-and-plywood shack at a camp outside Batticaloa.

Adding to the controversy is the government's creation of a "special economic zone" that will be open to foreign investors and closed to former residents. This land seizure is a violation of the Constitution and international humanitarian law, according to the Center for Policy Alternatives, an independent think tank in Colombo, the capital.

Thousands of Tamils who have been resettled now live in areas where electricity and clean water are almost nonexistent, the report adds.

Jens Hesemann, head of the UN refugee agency in the eastern province, says that, of the 17,000 still to be resettled, he expects only 7,000 will remain by year's end as new areas are confirmed to be free of land mines and unexploded shells.

Last year the government unveiled a three-year, $1.84 billion Eastern Revival Program, with just over half the funds to come from abroad. Critics say little money has come from the central government.

Pillayan attributes the current funding shortage to poor budgetary planning before he took office. Rural reconstruction will "accelerate" next year, he promises, ticking off a list of upcoming projects to improve agriculture and livelihoods. "We must be patient," he says. "Violence has no place anymore."

On a recent afternoon in Trincomalee, a gleaming $7.5 million bus station was christened by the US development agency, to be followed by a common market where Tamil and Sinhalese merchants will peddle wares side by side.

"If we can establish peace here, it will send a message to the whole country," says Mayor S.G. Mugundan, a Tamil.

• This story was reported with a grant from the Pulitzer Center on Crisis Reporting.